The response from US steel- and aluminum makers was swift and
positive, although it's worth noting that the aluminum industry
in the country has been in steady retreat since 1980.

Automakers who use a lot of steel and aluminum in their vehicles
were either quiet or diplomatic, even as slower February sales
compared to a year ago and the Trump announcement send the entire
sector's stock prices into decline.

"We purchase over 90% of our steel for US production from
US suppliers," General Motor said in an emailed statement to
Business Insider.

"We need to better understand the details around the
announcement today, but the bottom line is we support trade
policies that enable US manufacturers to win and grow jobs in the
US, and at the same time succeed in global markets. Over the last
several years, we have shown we are a disciplined company with
the ability to adjust and adapt to a variety of market changes
around the world, and we'll do that again as needed."

Trying to understand Trump tariffs

caption

Trump's tariffs could affect automakers like Ford. There is a lot of aluminum in the F-150 pickup.

source

Thomson Reuters

Ford didn't immediately respond to a request for comment.
The automaker has shifted to using more lightweight aluminum in
its bestselling, highly profitable F-Series pickup trucks.
Shedding weight helps the company meet more stringent federal
fuel-economy standards.

Tesla's pricey luxury vehicles, the Model S sedan and Model
X SUV, use a lot of aluminum in their construction, but the
company declined to comment on the tariff, which would be 10%.
(Steel would be 25%.)

Carmakers aren't in the dark about changes to commodity
pricing. Earlier this year, Ford CFO Bob Shanks said that the
company was preparing to for higher commodity costs to hit its
bottom line.

Additionally, the industry in the US as a whole had been
girding for a Trump border tax in 2017. The expectation at the
time, according to various sources, was that a continued strong
economy coupled with a corporate tax cut would even everything
out.

Trump tariffs are the new border tax

caption

Tesla stamps its own aluminum body panels.

source

Benjamin Zhang/Business Insider

In that context, the tariffs are the new border tax. It
will now be up to automakers to determine whether they should
absorb the higher cost or pass it on to consumers.

The latter could be more likely because as sales have
plateaued in the US, transaction prices have moved up. A better
economy has meant that more people can afford to pony up more
money for well-optioned vehicles. Extended loan terms and
low-interest rates have also helped.

Barring an economic shock, automakers should be able to ask
for more from customers.

Of course, for reliable Ford pickup truck buyers
concentrated in states that Trump carried in 2016, tariffs could
simply mean a costlier set of wheels. The idea is that steel and
aluminum manufacturers will pay Trump back with hiring. Tariffs
might have some effect on the steel business, but on aluminum,
it's improbable. There are just two operational smelters in the
entire country; over half of the US supply is imported.

It remains to be seen whether the tariffs will actually
hurt the automakers' business; it's possible that they'll take
them in stride.

But there are signs that 2018 in the year that booming US
auto sales will cool off, after a three-year run. The market
won't tank, but car companies could go into a defensive mode. For
Trump, this means that layoffs of autoworkers could replace
hiring, and new factories will be put on hold. Investment driven
by the tax cut won't happen because it will have to used to pay
for more expensive raw materials.

But during the presidential campaign and into his first year in
office, Trump has shown little understanding of the global auto
industry. So it shouldn't be a surprise that, although he needs
Detroit to invest and hire in critical 2020 election states such
as Michigan and Ohio, he's doing exactly the opposite of what the
industry needs - and maybe even raising the price on that new
pickup a voter has been planning to spend his tax-cut money on.